Bank of America Corporation Annual report [Section 13 and 15(d), not S-K Item 405]

Annual report [Section 13 and 15(d), not S-K Item 405]

Commitments and Contingencies

Commitments and Contingencies

12 Months Ended

Dec. 31, 2024

Commitments and Contingencies Disclosure [Abstract]

In the normal course of business, the Corporation enters into a number of off-balance sheet commitments. These commitments expose the Corporation to varying degrees of credit and market risk and are subject to the same credit and market risk limitation reviews as those instruments recorded on the Consolidated Balance Sheet.

Credit Extension Commitments

The Corporation enters into commitments to extend credit such as loan commitments, SBLCs and commercial letters of credit to meet the financing needs of its customers. The following table includes the notional amount of unfunded legally binding lending commitments net of amounts distributed (i.e., syndicated or participated) to other financial institutions. The distributed amounts were $10.4 billion and $10.3 billion at December 31, 2024 and 2023. The carrying value of the Corporation’s credit extension commitments at December 31, 2024 and 2023, excluding commitments accounted for under

the fair value option, was $1.1 billion and $1.2 billion, which predominantly related to the reserve for unfunded lending commitments. The carrying value of these commitments is classified in accrued expenses and other liabilities on the Consolidated Balance Sheet.

Legally binding commitments to extend credit generally have specified rates and maturities. Certain of these commitments have adverse change clauses that help to protect the Corporation against deterioration in the borrower’s ability to pay. The following table includes the notional amount of commitments of $2.2 billion and $2.6 billion at December 31, 2024 and 2023 that are accounted for under the fair value option. However, the table excludes the cumulative net fair value for these commitments of $144 million and $67 million at December 31, 2024 and 2023, which is classified in accrued expenses and other liabilities. For more information regarding the Corporation’s loan commitments accounted for under the fair value option, see Note 21 – Fair Value Option.



Credit Extension Commitments

	Expire in One Year or Less		Expire After One Year Through Three Years		Expire After Three Years Through Five Years		Expire After Five Years		Total
(Dollars in millions)	December 31, 2024
Notional amount of credit extension commitments
Loan commitments (1)	$	123,520	$	227,539	$	191,469	$	19,011	$	561,539
Home equity lines of credit	3,518		10,570		8,920		21,272		44,280
Standby letters of credit and financial guarantees (2)	25,080		8,006		2,589		370		36,045
Letters of credit	781		142		8		19		950
Other commitments (3)	5		52		88		1,028		1,173
Legally binding commitments	152,904		246,309		203,074		41,700		643,987
Credit card lines (4)	456,185		—		—		—		456,185
Total credit extension commitments	$	609,089	$	246,309	$	203,074	$	41,700	$	1,100,172

	December 31, 2023
Notional amount of credit extension commitments
Loan commitments (1)	$	124,298	$	198,818	$	193,878	$	15,386	$	532,380
Home equity lines of credit	2,775		9,182		11,195		21,975		45,127
Standby letters of credit and financial guarantees (2)	21,067		9,633		2,693		652		34,045
Letters of credit	873		207		66		29		1,175
Other commitments (3)	17		50		108		1,035		1,210
Legally binding commitments	149,030		217,890		207,940		39,077		613,937
Credit card lines (4)	440,328		—		—		—		440,328
Total credit extension commitments	$	589,358	$	217,890	$	207,940	$	39,077	$	1,054,265

(1) At December 31, 2024 and 2023, $4.4 billion and $3.1 billion of these loan commitments were held in the form of a security.

(2) The notional amounts of SBLCs and financial guarantees classified as investment grade and non-investment grade based on the credit quality of the underlying reference name within the instrument were $25.0 billion and $10.1 billion at December 31, 2024, and $23.6 billion and $9.7 billion at December 31, 2023. Amounts in the table include consumer SBLCs of $1.0 billion and $744 million at December 31, 2024 and 2023.

(3) Primarily includes second-loss positions on lease-end residual value guarantees.

(4) Includes business card unused lines of credit.

Other Commitments

At December 31, 2024 and 2023, the Corporation had commitments to purchase loans (e.g., residential mortgage and commercial real estate) of $242 million and $822 million, which upon settlement will be included in trading account assets, loans or LHFS, and commitments to purchase commercial loans of $768 million and $420 million, which upon settlement will be included in trading account assets.

At December 31, 2024 and 2023, the Corporation had commitments to enter into resale and forward-dated resale and securities borrowing agreements of $109.8 billion and $117.0 billion, and commitments to enter into forward-dated repurchase and securities lending agreements of $87.1 billion and $63.0 billion. A significant portion of these commitments will expire within the next 12 months.

At both December 31, 2024 and 2023, the Corporation had a commitment to originate or purchase up to $4.0 billion, on a rolling 12-month basis, of auto loans and leases from a strategic partner. This commitment extends through November 2026 and can be terminated with 12 months prior notice.

At December 31, 2024 and 2023, the Corporation had unfunded equity investment commitments of $787 million and $477 million.

As a Federal Reserve member bank, the Corporation is required to subscribe to a certain amount of shares issued by its Federal Reserve district bank, which pays cumulative dividends at a prescribed rate. At both December 31, 2024 and 2023, the Corporation had paid $5.4 billion for half of its subscribed shares, with the remaining half subject to call by the Federal Reserve district bank board, which the Corporation believes is remote.

Other Guarantees

Bank-owned Life Insurance Book Value Protection

The Corporation sells products that offer book value protection to insurance carriers who offer group life insurance policies to corporations, primarily banks. At December 31, 2024 and 2023, the notional amount of these guarantees totaled $3.3 billion and $3.8 billion. At December 31, 2024 and 2023, the Corporation’s maximum exposure related to these guarantees totaled $506 million and $577 million, with estimated maturity dates between 2034 and 2037.

Indemnifications

In the ordinary course of business, the Corporation enters into various agreements that contain indemnifications, such as tax indemnifications, whereupon payment may become due if certain external events occur, such as a change in tax law. The indemnification clauses are often standard contractual terms and were entered into in the normal course of business based on an assessment that the risk of loss would be remote. These agreements typically contain an early termination clause that permits the Corporation to exit the agreement upon these events. The maximum potential future payment under indemnification agreements is difficult to assess for several reasons, including the occurrence of an external event, the inability to predict future changes in tax and other laws, the difficulty in determining how such laws would apply to parties in contracts, the absence of exposure limits contained in standard contract language and the timing of any early termination clauses. Historically, any payments made under these guarantees have been de minimis. The Corporation has assessed the probability of making such payments in the future as remote.

Merchant Services

The Corporation in its role as merchant acquirer or as a sponsor of other merchant acquirers may be held liable for any reversed charges that cannot be collected from the merchants due to, among other things, merchant fraud or insolvency. If charges are properly reversed after a purchase and cannot be collected from either the merchants or merchant acquirers, the Corporation may be held liable for these reversed charges. The ability to reverse a charge is primarily governed by the applicable payment network rules and regulations, which include, but are not limited to, the type of charge, type of payment used and time limits. The total amount of transactions subject to reversal under payment network rules and regulations processed for the preceding six-month period, which was approximately $197 billion, is an estimate of the Corporation’s maximum potential exposure as of December 31, 2024. The Corporation’s risk in this area primarily relates to circumstances where a cardholder has purchased goods or services for future delivery. The Corporation mitigates this risk by requiring cash deposits, guarantees, letters of credit or other types of collateral from certain merchants. The Corporation’s reserves for contingent losses, and the losses incurred related to the merchant processing activity were not significant.

Exchange and Clearing House Member Guarantees

The Corporation is a member of various securities and derivative exchanges and clearinghouses, both in the U.S. and other countries. As a member, the Corporation may be required to pay a pro-rata share of the losses incurred by some of these organizations as a result of another member default and under other loss scenarios. The Corporation’s potential obligations may be limited to its membership interests in such exchanges and clearinghouses, to the amount (or multiple) of the Corporation’s contribution to the guarantee fund or, in limited instances, to the full pro-rata share of the residual losses after applying the guarantee fund. The Corporation’s maximum potential exposure under these membership agreements is difficult to estimate; however, the Corporation has assessed the probability of making any such payments as remote.

Prime Brokerage and Securities Clearing Services

In connection with its prime brokerage and clearing businesses, the Corporation performs securities clearance and settlement services with other brokerage firms and clearinghouses on behalf of its clients. Under these arrangements, the Corporation stands ready to meet the obligations of its clients with respect to securities transactions. The Corporation’s obligations in this respect are secured by the assets in the clients’ accounts and the accounts of their customers as well as by any proceeds received from the transactions cleared and settled by the

Corporation on behalf of clients or their customers. The Corporation’s maximum potential exposure under these arrangements is difficult to estimate; however, the potential for the Corporation to incur material losses pursuant to these arrangements is remote.

Fixed Income Clearing Corporation Sponsored Member Repo Program

The Corporation acts as a sponsoring member in a repo program whereby the Corporation clears certain eligible resale and repurchase agreements through the Government Securities Division of the Fixed Income Clearing Corporation on behalf of clients that are sponsored members in accordance with the Fixed Income Clearing Corporation’s rules. As part of this program, the Corporation guarantees the payment and performance of its sponsored members to the Fixed Income Clearing Corporation. The Corporation’s guarantee obligation is secured by a security interest in cash or high-quality securities collateral placed by clients with the clearinghouse and therefore, the potential for the Corporation to incur significant losses under this arrangement is remote. The Corporation’s maximum potential exposure, without taking into consideration the related collateral, was $191.9 billion and $132.5 billion at December 31, 2024 and 2023.

Other Guarantees

In the normal course of business, the Corporation periodically guarantees the obligations of its affiliates in a variety of transactions including ISDA-related transactions and non-ISDA related transactions such as commodities trading, repurchase agreements, prime brokerage agreements and other transactions.

Guarantees of Certain Long-term Debt

The Corporation, as the parent company, fully and unconditionally guarantees the securities issued by BofA Finance LLC, a consolidated finance subsidiary of the Corporation, and effectively provides for the full and unconditional guarantee of trust securities and capital securities issued by certain statutory trust companies that are 100 percent owned finance subsidiaries of the Corporation.

Representations and Warranties Obligations and Corporate Guarantees

The Corporation securitizes first-lien residential mortgage loans generally in the form of RMBS guaranteed by the GSEs or by GNMA in the case of FHA-insured, VA-guaranteed and Rural Housing Service-guaranteed mortgage loans, and sells pools of first-lien residential mortgage loans in the form of whole loans. In addition, in prior years, legacy companies and certain

subsidiaries sold pools of first-lien residential mortgage loans and home equity loans as private-label securitizations or in the form of whole loans. In connection with these transactions, the Corporation or certain of its subsidiaries or legacy companies make and have made various representations and warranties. Breaches of these representations and warranties have resulted in and may continue to result in the requirement to repurchase mortgage loans or to otherwise make whole or provide indemnification or other remedies to sponsors, investors, securitization trusts, guarantors, insurers or other parties (collectively, repurchases).

Unresolved Repurchase Claims

Unresolved representations and warranties repurchase claims represent the notional amount of repurchase claims made by counterparties, typically the outstanding principal balance or the unpaid principal balance at the time of default. In the case of first-lien mortgages, the claim amount is often significantly greater than the expected loss amount due to the benefit of collateral and, in some cases, mortgage insurance or mortgage guarantee payments.

The notional amount of unresolved repurchase claims at December 31, 2024 and 2023 was $2.1 billion and $5.4 billion. These balances included $837 million and $2.2 billion at December 31, 2024 and 2023 of claims related to loans in specific private-label securitization groups or tranches where the Corporation owns substantially all of the outstanding securities or will otherwise realize the benefit of any repurchase claims paid.

During 2024, the Corporation received $181 million in new repurchase claims that were not time-barred. During 2024, $3.5 billion in claims were resolved.

Reserve and Related Provision

The reserve for representations and warranties obligations and corporate guarantees was $184 million and $604 million at December 31, 2024 and 2023 and is included in accrued expenses and other liabilities on the Consolidated Balance Sheet, and the related provision is included in other income in the Consolidated Statement of Income. The representations and warranties reserve represents the Corporation’s best estimate of probable incurred losses, is based on its experience in previous negotiations, and is subject to judgment, a variety of assumptions and known or unknown uncertainties. At December 31, 2024, the estimated range of possible loss in excess of the accrued representations and warranties reserve was not significant. Future representations and warranties losses may occur in excess of the amounts recorded for these exposures; however, the Corporation does not expect such amounts to be material to the Corporation's financial condition and liquidity.

Other Contingencies

In 2023, the Federal Deposit Insurance Corporation (FDIC) issued a final rule to impose a special assessment to recover certain estimated losses to the Deposit Insurance Fund (DIF) arising from the closures of Silicon Valley Bank and Signature Bank. The estimated losses will be recovered through quarterly special assessments collected from certain insured depository institutions, including the Corporation, and collection began during the three months ended June 30, 2024. As of December 31, 2024 and 2023, the Corporation’s accrual for its estimated share of the FDIC special assessment was $1.7 billion and $2.1 billion. The Corporation continues to monitor the FDIC’s estimated loss to the DIF, which could affect the amount of its accrued liability.

Litigation and Regulatory Matters

In the ordinary course of business, the Corporation and its subsidiaries are routinely defendants in or parties to many pending and threatened legal, regulatory and governmental actions and proceedings. In view of the inherent difficulty of predicting the outcome of such matters, particularly where the claimants seek very large or indeterminate damages or where the matters present novel legal theories or involve a large number of parties, the Corporation generally cannot predict the eventual outcome of the pending matters, timing of the ultimate resolution of these matters, or eventual loss, fines or penalties related to each pending matter.

As a matter develops, the Corporation, in conjunction with any outside counsel handling the matter, evaluates whether such matter presents a loss contingency that is probable and estimable, and, for the matters disclosed below, whether a loss in excess of any accrued liability is reasonably possible in future periods. Once the loss contingency is deemed to be both probable and estimable, the Corporation will establish an accrued liability and record a corresponding amount of litigation-related expense. The Corporation continues to monitor the matter for further developments that could affect the amount of the accrued liability that has been previously established. Excluding expenses of internal and external legal service providers, litigation and regulatory investigation-related expense of $266 million, $519 million and $1.2 billion was recognized in 2024, 2023 and 2022, respectively.

For any matter disclosed in this Note for which a loss in future periods is reasonably possible and estimable (whether in excess of an accrued liability or where there is no accrued liability), the Corporation’s estimated range of possible loss is $0 to $0.8 billion in excess of the accrued liability, if any, as of December 31, 2024.

The accrued liability and estimated range of possible loss are based upon currently available information and subject to significant judgment, a variety of assumptions and known and unknown uncertainties. The matters underlying the accrued liability and estimated range of possible loss are unpredictable and may change from time to time, and actual losses may vary significantly from the current estimate and accrual. The estimated range of possible loss does not represent the Corporation’s maximum loss exposure.

Information is provided below regarding the nature of the litigation or other contingency and, where specified, associated claimed damages. Based on current knowledge, and taking into account accrued liabilities, management does not believe that loss contingencies arising from pending matters, including the matters described below, will have a material adverse effect on the consolidated financial condition or liquidity of the Corporation. However, in light of the significant judgment, variety of assumptions and uncertainties involved in those matters, some of which are beyond the Corporation’s control, and the very large or indeterminate damages sought in some of those matters, an adverse outcome in one or more of those matters could be material to the Corporation’s business or results of operations for any particular reporting period, or cause significant reputational harm.

Bank Secrecy Act/Anti-Money Laundering and Economic Sanctions Compliance

BANA agreed to a Consent Order announced by the Office of the Comptroller of the Currency (OCC) on December 23, 2024, and the Corporation continues to respond to requests for information from other regulators, relating to certain aspects of its BSA/AML and Economic Sanctions Compliance Programs (Programs). Since late 2023, the Corporation has been working with regulators to make changes to its Programs and has already completed significant steps to satisfy requirements of the Consent Order. The Corporation does not believe that these issues relating to the Programs will have a material adverse financial impact on the Corporation.

CFPB Lawsuit Related to Processing Electronic Payments

On December 20, 2024, the Consumer Financial Protection Bureau (CFPB) filed suit against BANA, JPMorgan Chase Bank, N.A., Wells Fargo Bank, N.A., and Early Warning Services, LLC in the U.S. District Court for the District of Arizona with respect to BANA’s and co-defendants’ processing of electronic payments of funds through the Zelle network. The CFPB alleges that BANA and its co-defendants violated the Consumer Financial Protection Act by not adequately protecting consumers from fraud on the Zelle network and the Electronic Fund Transfer Act by not reasonably investigating and reimbursing disputed Zelle transfers, and seeks both monetary and injunctive relief.

Deposit Insurance Assessment

In 2017, the FDIC filed suit against BANA in the U.S. District Court for the District of Columbia (District Court) alleging that BANA underpaid assessments to the DIF in the 2012-2014 time frame in the amount of $1.12 billion and asserting claims under the Federal Deposit Insurance Act and for unjust enrichment. The FDIC Enforcement Section is also conducting a parallel investigation related to the same alleged underpayments. BANA disputes the FDIC’s claims and has asserted counterclaims challenging the FDIC’s regulations under the Administrative Procedure Act. Pending final resolution, BANA has pledged security satisfactory to the FDIC related to the disputed additional assessment amounts. On July 1, 2024, the District Court judge vacated the magistrate judge’s April 2023 report and recommendation for resolving the parties’ cross-motions for summary judgment, and asked the parties to file new motions. The parties subsequently filed their new summary judgment motions, which are pending.

LIBOR

Beginning in 2011, several individual and putative class actions were filed against the Corporation, BANA, and certain Merrill Lynch entities, as well as other banks on the U.S. Dollar LIBOR panel. These actions alleged that defendants manipulated LIBOR during the financial crisis and asserted a variety of claims, including federal and state antitrust, Commodity Exchange Act, Racketeer Influenced and Corrupt Organizations Act, Securities Exchange Act of 1934, common law fraud, and breach of contract claims and sought compensatory, treble and punitive damages, and injunctive relief. All remaining cases are pending in the U.S. District Court for the Southern District of New York. Defendants’ motion for summary judgment is pending on all remaining claims, brought by individual plaintiffs and one class of plaintiffs who purchased over-the-counter instruments incorporating LIBOR.

Unemployment Insurance Prepaid Cards

Beginning in January 2021, BANA was named as a defendant in putative class action and mass action lawsuits related to its administration of prepaid debit cards to distribute unemployment and other state benefits for the State of California, which was the largest program administered by BANA as measured by total benefits and number of participants. These lawsuits have been consolidated into a multidistrict litigation in the U.S. District Court for the Southern District of California where plaintiffs assert claims for violations of the Electronic Fund Transfer Act, state statutory and common law claims and due process, and seek monetary damages and injunctive relief based on allegations that BANA failed to properly investigate and remediate cardholder claims of fraudulent transactions and to prevent fraud, among other allegations.